How Will an Increase in the Price Level Affect the Aggregate

question 109

Multiple Choice

How will an increase in the price level affect the aggregate demand curve?  

• A) It will cause the aggregate demand curve to shift to the left. 
• B) It will cause the aggregate demand curve to shift to the right. 
• C) It will cause a movement up to the left along the aggregate demand curve. 
• D) It will cause a movement down to the right along the aggregate demand curve.

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Definitions:

Indirect Exchange Rate

An exchange rate quoted as the foreign currency per unit of the domestic currency, which is the reciprocal of the more common direct exchange rate format.

Canadian Dollar

The currency of Canada, represented by the symbol CAD in the foreign exchange market.

Forward Rate

The expected interest rate agreed upon in a forward contract, applicable to a financial transaction that will occur in the future.

Spot Rate

The current market price at which a particular asset can be bought or sold for immediate delivery.